(March 5): Thailand’s nearly yearlong stretch of falling consumer prices may now provide a buffer against potential energy-driven inflation spike.
The consumer price index fell 0.88% in February from a year earlier, marking the 11th straight month of negative headline rate, Commerce Ministry data showed Thursday. On a monthly basis, the index dropped 0.24%.
Both figures were weaker than the median estimate in a Bloomberg survey of economists. Core inflation rose 0.56%, in line with economist expectations.
With tensions in the Middle East threatening to lift global oil prices and pushing inflation in many economies above targets, Thailand’s negative inflation and muted core readings could help cushion the impact.
Energy and food together account for roughly 70% of the consumer price basket. Over the past year, softer energy prices have kept overall inflation below the Bank of Thailand’s target range of 1%-3%. At a briefing on Thursday, Commerce Ministry said Thai inflation is expected to accelerate in March due to higher oil prices.
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Nantapong Chiralerspong, the ministry’s director-general of the Trade Policy and Strategy Office, said it’s difficult to assess the inflation outlook, as much depends on the intensity and duration of the conflict. If global oil prices remain in the US$80 ($102.14) to US$120 per barrel range, inflation this year could quicken to between 1% and 3%, he said.
But even a sustained 10% to 20% rise in energy prices would likely leave Thailand’s inflation below the upper bound of the central bank’s target, according to Bloomberg Economics, which estimates average consumer prices rising to 0.8% this year in a more extreme scenario.
Bank of Thailand Governor Vitai Ratanakorn said Wednesday that any pickup in inflation would be “manageable”, and that the conflict in Middle East could shave 0.1-0.2 percentage point off this year’s gross domestic product growth. Vitai and his fellow policymakers have already signalled that further rate cuts are unlikely.
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Higher oil prices would raise costs for prepared foods and other consumer goods, adding upward pressure on prices, Nantapong said. The ministry will review its 0%-1% inflation forecast next month.
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